Publications
\* correponding author, † student under my supervision.
2024
- Under reviewThe Impact of Government Inspections on Farms’ Adulteration Behaviors in Co-Existing Traceable and Non-Traceable Supply ChainsUnder first round review of Manufacturing & Service Operations Management, 2024
Problem definition: Economically motivated adulteration (EMA) frequently occurs in upstream segments of farming supply chains, posing significant challenges for downstream government inspections and underscoring the importance of supply chain traceability. Methodology/results: In this paper, we develop a model to examine the impact of government inspections and penalty imposition on deterring EMA in settings with co-existence of traceable and non-traceable supply chains. In the traceable supply chain, the provenance of sampled products can be preciously targeted, allowing government penalties to be imposed on the adulterating upstream farm; While in the non-traceable supply chain, penalties can only be imposed on the downstream vendor. We first fully characterize the equilibrium adulteration behavior of farms in each supply chain, and analyze how government penalties, quality enhancement after adulteration, and other market parameters jointly impact the adulteration equilibrium. Our analysis suggests that higher government penalties may inadvertently induce the traceable farm to engage in adulteration. This behavior is driven by the traceable farm’s desire to achieve a more favorable competitive position and circumvent the negative side-effect of indirect penalties from the non-traceable supply chain. We also conduct a preliminary empirical analysis by utilizing a sampling test dataset of China’s domestic agricultural market. Under specific market conditions, we observe a positive correlation between government inspection frequency and adulteration rate of traceable farms, which aligns with our analytical results. Managerial implications: Our results highlight the limitations of random inspection policies across traceable and non-traceable supply chains in a competitive market. By focusing inspection efforts on traceable products with specific characteristics, agencies can allocate resources more effectively and address EMA risks in farming supply chains more proactively.
- Under reviewOnline Food Delivery Contracting in Three-Sided MarketsUnder second round review of Manufacturing & Service Operations Management, 2024
Problem definition: We examine a three-sided food delivery market in which an online food delivery platform should match customers’ online orders and self-scheduling delivery drivers. The platform also needs to manage its relationship with a restaurant that provides food through this platform while also offering an alternative dine-in option. Different contracting schemes governing the relationship between the platform and the restaurant affect their profitability. Methodology/results: We develop a game-theoretic model to investigate the contracting strategies of the platform and the restaurant under three prevalent contracts: dynamic-price/dynamic-wage, fixed-price/dynamic-wage, and dynamic-price/fixed-wage contracts. We show that the price competition between the online and dine-in channels is more fierce in the sharing economy compared to the traditional economy (with fixed labor supply) if and only if the fixed supply is more than that in the sharing economy, regardless of the contracting scheme. Although all contracts lead to the same market outcome in the traditional economy, self-scheduling drivers significantly influence the performance of these contracts in the sharing economy. The dynamic-price/fixed-wage contract induces the most fierce competition in the food market, while the dynamic-price/dynamic-wage contract results in the softest. The platform prefers the fixed-price/dynamic-wage contract, while other parties in the food delivery market usually prefer the dynamic-price/fixed-wage contract. Moreover, we show that the contractual relationship in the food delivery market does not affect the dine-in offline prices, which supports the observation of the restaurant’s relatively robust dine-in prices. Managerial implications: Despite its prevalence, the dynamic-price/dynamic-wage contract typically results in the poorest performance for the platform and moderate performance for the restaurant. Unless the supply is excessively costly, a dynamic-price/fixed-wage contract with well-designed subscription fees can benefit all parties in the food delivery chain, including the drivers and customers. Our findings also offer guidance to policymakers in balancing the interests of gig workers and society. A relatively high minimum wage rate (wage per delivery) can harm society and gig workers, while a relatively high minimum wage (per hour) can benefit both.
2023
- POMThe effects of signaling blockchain-based track and trace on consumer purchases: Insights from a quasi-natural experimentHao Ying, Xiaosong (David) Peng, Xiande Zhao, and Zhong Chen*Production and Operations Management, Available online, 2023
Abstract Blockchain-based track and trace (BCT) is increasingly adopted in the retail supply chain. However, there is little rigorous empirical evidence quantifying the effects of BCT on consumer purchases or examining the heterogeneity of these effects with varying product-related characteristics. Employing transactional data from a leading global e-retailer that contains 540 stock keeping units (SKUs), we design a quasi-natural experiment spanning 80 weeks to estimate the signaling effect of BCT (i.e., disclosure of the BCT to consumers) on consumer purchases. Drawing on the signaling theory, we propose that BCT can serve as an effective and reliable signal of the product quality and trustworthiness of the retailer. Our research uncovers significant positive effects of BCT on the average purchase quantity per buyer, the total number of buyers, the number of new buyers, and the number of unique visitors to the traced products. We also find nuanced moderation effects for two product-related characteristics—namely, consumer review inconsistency and product origins—on the influence of BCT on consumer purchases. Specifically, the signal effectiveness of BCT is stronger for products with more inconsistent customer reviews that indicate greater information asymmetry. The effect of BCT for products sourced globally is magnified because of the high BCT signal reliability attributed to the unique properties of the blockchain. The heterogeneous effects of BCT by varying product-related characteristics can inform managers in selecting the right products to implement BCT.
- MSOMQuality Signaling Through Crowdfunding PricingManufacturing & Service Operations Management, 25(2):668-685, 2023
Problem definition: This paper studies an entrepreneur’s pricing strategy in a reward-based crowdfunding campaign under asymmetric product quality information. We propose two signaling mechanisms and investigate how entrepreneurs can leverage their pricing strategy to signal a high-quality project. Academic/practical relevance: This problem is relevant to practice, as asymmetric quality information is a significant concern in reward-based crowdfunding. High-quality entrepreneurs seek credible mechanisms to signal the quality of projects to customers. Methodology: We develop a stylized game-theoretic signaling model with funding and regular selling periods that captures asymmetric quality information between an entrepreneur and customers. Results: We propose a new theory on quality signaling in crowdfunding. We show that contingent access to the regular selling market after running a successful crowdfunding campaign allows high-quality entrepreneurs to signal their quality through low funding prices (one-price signaling). A high-quality entrepreneur can increase his funding price and still signal his high-quality level if he commits to the future regular selling price (two-price signaling). We show that the distinct feature of crowdfunding, that is, the probabilistic nature of crowdfunding, plays different roles in one- and two-price signaling. It is the driving force for the separating equilibrium in one-price signaling, and in two-price signaling, it affects how the entrepreneur should manipulate his funding and regular selling prices to reduce signaling cost. Managerial implications: Entrepreneurs should be mindful of pricing in funding and regular selling periods because it could play an essential role in signaling quality information. Our findings suggest practical tools for quality signaling in crowdfunding. We also investigate when price commitment is the most beneficial for a high-quality entrepreneur, looking for potential signaling mechanisms.Funding: W. Zhou acknowledges financial support from the National Natural Science Foundation of China [Grant 72192823 and Grant 71821002].Supplemental Material: The online appendices are available at https://doi.org/10.1287/msom.2022.1177.
2021
- EJORManaging competitive levers in a collaborative distribution channelEhsan Bolandifar, Zhong Chen*, and Kaijie ZhuEuropean Journal of Operational Research, 293(3):1031-1042, 2021
This paper studies a distribution channel where a national brand manufacturer and a dominant retailer collaborate to promote the national brand product. To obtain an advantageous competitive position, the dominant retailer may introduce a store brand, whereas the national brand manufacturer may distribute its products through an alternative channel (e.g., a weak retailer). We study how the two channel members should manage their competitive levers (i.e., the store brand for the dominant retailer and the manufacturer’s weak retailer) in such a collaborative distribution channel. On the one hand, we show that the channel members should use the competitive levers as long as they are efficient enough so that the manufacturer and dominant retailer can obtain higher margins from these levers than that from the national brand at the dominant retailer. On the other hand, we also find that the manufacturer and dominant retailer may not necessarily benefit from more efficient competitive levers. That is, the dominant retailer may prefer a less efficient source to procure the store brand product, and the manufacturer may choose a less efficient weak retailer. Moreover, we discover an interesting observation driven by the network externality effect: a firm may benefit when its competitor becomes more efficient (e.g., more efficient store brand procurement at the dominant retailer will increase the weak retailer’s profit). All the above findings hinge upon the collaboration between the national brand manufacturer and dominant retailer, which cautions firms on how to manage their competitive levers in a collaborative distribution channel.
2020
- OMEGAHedging through index-based price contracts in commodity-based supply chainsEhsan Bolandifar, and Zhong Chen*Omega-The International Journal of Management Science, 90:101976, 2020
This paper studies the optimal hedging strategy of risk-neutral firms in supply chain settings. We model a retailer procuring goods through index-based price contracts from two commodity processors. The processors’ input commodity prices are random and correlated. The retailer faces price-sensitive demand curves; therefore, it controls product demand through retail pricing in the final product market. We characterize the optimal contracting terms for the processors and show that they prefer to hedge part of their exposure to the commodity price risk. The optimal contract for processor comprises a processing margin independent of the commodity price volatility and a hedge ratio that is a function of the commodity price volatility and the products substitution factor. We uncover a new rationale for hedging in settings where downstream firms have pricing power; both processors and the retailer benefit from the retailer’s pricing power when their margins are linked to input prices; an index-based price contract is a means to link the processors’ and the retailer’s margins. We further investigate how different market parameters affect the optimal hedge ratios and extend our model to settings with random market sizes and asymmetric substitution for final products.